An entrepreneur is planning to market a new brand of bottled unsweetened, organic iced tea. The revenue on each bottle of iced tea to be sold has been determined to be $2.52 The entrepeneur needs to decide on the size of of the bottling plan to produce the iced tea. A small bottling plant will have an annual operating cost of $135K and be able to fill 238K bottles per year. A large bottling plant will have an annual operating cost of $369K and be able to fill 549K bottles per year. Three levels of demand are considered likely: 10,000, 100,000 and 500,000 bottles per year. Complete parts (a) through (i) below.
Demand Probability
10,000 0.3
100,000 0.2
500,000 0.5
a. Construct a payoff table, indicating the events and alternative courses of action. Select the correct answer below and fill in the answer boxes to complete your choice.
(Do not include the $ symbol in your answers.)
A.
Event Action
Small plant Large plant
10,000
100,000
500,000
B.
Event Action
50 100 200
Install
Do Not Install
